New General Motors Co. (NYSE: GM) CEO Mary Barra spoke with reporters recently and told them she has no radical plans for the No. 1 car company in the United States. Given GM’s size and dinosaur-like management, she stated the obvious. She wants to change GM the way earlier management did, but pick up the pace. That will be very hard to do, particularly in the essential European market.
Barra cannot change GM much in the United States, if the years since the recession are any signal. GM has continued to hold about 18% of the American market. Rivals Ford Motor Co. (NYSE: F) and Toyota Motor Corp. (NYSE: TM) appear to be set to keep their pieces of the industry. And Mercedes and BMW can keep their stranglehold on the highly profitable luxury market, at least for a several years. GM may introduce a record number of new products, but other large car companies will do so as well.
GM’s success in China is its crown jewel. Again, no one should expect much change there, although the number of strong competitors it has continues to increase. As it is the world’s largest car market, global manufacturers need to do well in the People’s Republic. GM and its decades-old rival Volkswagen may keep their place as Chinese sales leaders for now, but the other five or six global manufacturers will do anything within reason to bite into those shares.
Barra’s legacy could be determined in Europe, where GM has lost money for two decades. Those losses have mounted into the billions of dollars and have become permanent drags on GM’s earnings. GM has very few options in Europe. Unions and national governments can block a full-scale restructuring by preventing mass layoffs, so cost reductions are not a likely way to move from loss to profit. GM has been able to cut tiny portions of its capacity, but not enough to balance plunging sales. And those sales are at the core of GM’s Europe problem.
GM’s sales in Europe during 2013 fell by 4.3%, according to numbers based on new registrations issued by AECA, the European automobile manufacturers’ association. GM’s market share fell from 8.2% in 2012 to 8.0%. The market share of the leader, Volkswagen, rose from 24.7% to 25.0%. Overall, sales in Europe fell 1.7% last year, so GM’s chances at a turnaround continue to fade.
The one thing GM needs to alter to improve its global fortunes is Europe. Given the bind it is in, Barra cannot do that.
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